Countrywide Financial ( CFC) dropped 4% a day after Brandes Investment Partners revealed that it has taken a big stake in the struggling mortgage lender. The San Diego, Calif.-based value investor -- which advises on $125 billion in assets for individuals, pension funds, foundations and endowments -- has taken a 7.9% stake in Countrywide, according to filings with the Securities and Exchange Commission. Brandes held 46 million shares of Countrywide as of Sept. 30, the filing says. At recent prices, the stake was valued at around $770 million. Also Monday, a former Countrywide vice president, Quan Zhu, 43, agreed to settle insider trading charges. The SEC filed the charges against Zhu in a Los Angeles federal district court on Monday. The SEC alleges that Zhu traded Countrywide stock in October 2004 "while aware of confidential negative earnings information" that was about to be released on the lender's third quarter that year. Zhu settled the charges, without admitting or denying the allegations. He agreed to pay a total of $108,840 in fines and disgorgement. The SEC previously filed insider trading charges against two other former Countrywide employees for involvement or trading on the same information. Both have settled their cases, the SEC says.
Countrywide has been hit hard this year as home prices have dropped and borrowers have had trouble paying their mortgage loans. The Calabasas, Calif.-based lender announced in September that it planned to slash its workforce by 20% as mortgage-origination volume plunged. Investors have also fled the market for mortgage-backed securities since defaults spiked late last year, saddling holders of the riskiest debt with huge losses. Countrywide posted a loss of $1.2 billion for the third quarter, or $2.85 a share. Revenue plunged to a negative $50 million from $2.82 billion a year ago, as the company took a $718 million loss on the sale of loans and boosted its loan loss provision to $934 million from $38 million a year earlier. Compounding the poor earnings, the SEC is also looking into CEO and co-founder Angelo Mozilo's accelerated sales of Countrywide stock under a 10b5-1 plan. Mozilo has made more than $100 million on stock sales this year, even as Countrywide shares have tumbled more than 50% amid the worsening housing market. Despite the loss, Countrywide had said it planned to return to profitability in the fourth quarter and in 2008. Shares were most recently down 64 cents to $16.19.